Saturday, June 15, 2024

International Trade improves, but deficits remain

Trade between Botswana and other countries improved last month in line with improvements in the diamond industry, with the world’s top diamond producer seeing an increase in exports. However, the country continues to report massive monthly trade deficits, putting pressure in Botswana’s reserves.

The trade data for August released on Thursday by Statistics Botswana reveals that exports were registered at P2.6 billion, up by 7.9 percent from the revised July 2020 value of P2.5 billion. The increase in exports was on the back of resurgence in the diamond supply chain, with  diamond exports increasing from the previous month’s  P1.98 billion to P2.1 billion. Machinery and electrical equipment also contributed to the positive trend after increasing by 81 percent to P 241.7 million in August 2020 against the same period last year.

Imports fell by 5.3 percent to P5.7 billion in August compared to July’s P6 billion following a decrease of 58.8 percent in fuel imports. However, an 84 percent  rise in diamonds imports counteracted the overall decrease in total imports to some extent, Statistics Botswana said in the report. The top imports were diamonds at 30 percent, food, beverages and tobacco representing 13.2 percent of imports while fuel imports accounted for 12.5 percent of the total value of goods and services brought in the country in August.

As usual, Botswana’s exports were mostly absorbed by diamond traders mainly from Asia, with a market share of 55.3 percent. India and The United Arab Emirates received exports representing 21.7 percent and 19.2 percent of total exports respectively, mainly attributable to diamonds. Belgium received 18.4 percent of total exports during the month, also due to diamond trades.  

Africa’s most advanced economy and next-door neighbour, South Africa,  was the major source of imports into Botswana with a contribution of 70.2 percent to the country’s total imports. Belgium contributed 10.1 percent, while China and Namibia contributed 3.7 percent each. In terms of regional trade, Southern African Customs Union (SACU) was the major source of imports with a contribution of 74.6 percent. The EU and Asia accounted for 11.0 percent and 10.6 percent respectively.

With export receipts coming at P2.6 billion against the import bill of P6 billion, the country once again recorded another huge monthly trade deficit of P3 billion, the third largest monthly trade deficit so far this year. It was lower than July’s P3.5 billion deficit, and half of the largest monthly trade deficit on record  of P6 billion registered in June. With the trade shortfalls between July and August already adding up to P6 billion, the third quarter will certainly be another quarter of deficits after the September data has been completed.

The skewed trade data follows a similar pattern of widening deficits. The first quarter recorded a P4.2 billion before ballooning to P9.3 billion in the second quarter, setting a new record for the biggest quarterly shortfall in over two decades.

Botswana’s trade position has been worsening and in the last five years, imports have been rising faster than exports, a sign that the country is losing money that could be circulating in the domestic economy that has been sluggish. Botswana ended 2019 with a cumulative trade balance deficit of P14.2 billion, the highest since 2012’s trade shortfall of P16.3 billion. The country’s continued growing deficits are reversals of gains made in the five-year period of consecutive trade balance surpluses that started in 2014, though the surpluses were growing smaller in size.

According to the finance ministry’s recently released budget strategy paper, Botswana’s current account registered a deficit of P15 billion in 2019 compared to a surplus of P1.2 billion recorded in 2018. The deficit was largely due to decreased goods exports, the officials said. The current account is further estimated to have recorded a deficit of P7.2 billion in the second quarter of 2020, largely due to a decline in diamond exports. Diamond exports fell from P16.9 billion in the second quarter 2019 to P103.2 million in the second quarter of 2020, whereas imports decreased from P5.5 billion to P1.5 billion, during the same period.

The income account, as well as the financial account also recorded deficits in the second quarter of 2020, resulting in the overall deficit in the balance of payments of P16.3 billion for the 12 months to June 2020, against a deficit of P5.4 billion recorded over the same period in 2019.


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